Aurelia Butler

Wealthy countries have rolled out more Covid-19 boosters than the total number of all doses administered so far in poorer nations, according to analysis by the Financial Times. High prices have been identified as one of the main factors behind the widening vaccine inequality a year into the world’s biggest inoculation campaign.The uneven provision of vaccines worldwide means that while rich nations such as the UK move to give every adult a booster to combat the Omicron variant, more troublesome variants could spring up in areas where there has been insufficient inoculation. Global health authorities have warned of that threat since the beginning of the global rollout.Nearly 16 booster doses per 100 people were administered across the world’s 59 high-income countries — as defined by the World Bank — up to December 15, compared with just under 11 shots per 100 people of any doses in low-income nations. The number of boosters dispensed in the world’s richest countries is growing by 5.5m each day. Spain and South Korea have, on average over the past week, jabbed more than 1 per cent of their population — around half a million people — each day. Germany is dispensing more than 800,000 boosters a day, also enough for 1 per cent of its population. The US, which has a much larger population, is rolling out boosters more slowly but is administering more than 1m a day.By contrast, across the world’s 29 low-income countries, which have a combined population 687m people, just 669,504 doses of any Covid vaccine were dispensed each day in the past week — around one jab for a tenth of one per cent of the population.One of the main barriers is cost, say health experts. Although most pharmaceutical companies have kept their pledge to offer tiered pricing, with poorer countries paying less for shots, the price of Covid-19 vaccines remains higher than for any other comparable jab widely used in poorer countries, according to the World Health Organization. The median price of Covid-19 vaccines for low income countries is $6.88 per dose, compared with a median of $10.45 a dose for high-income countries, according to figures compiled in November by the WHO. In comparison, another expensive vaccine sold in low income countries, the human papillomavirus jab, is priced at $4.50 a dose. “That gives you a sense of the difference in price,” said Tania Cernuschi, the WHO’s technical lead for global vaccine strategy.“Covid is the highest [priced] vaccine for lower-income settings that was ever commercialised,” she said. “Price tiering for Covid-19 vaccines is extremely limited relative to other vaccine markets.”Some countries pay for the shots themselves, while in others costs are absorbed by multilateral access schemes.Richard Kozul-Wright, director of globalisation and development strategies division at the United Nations Conference on Trade and Development (Unctad), expressed concern that poorer countries were being squeezed by high costs. “Given health budgets were stretched before the crisis, this just adds massively to that burden [in parts of the developing world],” he said. The 59 highest-income countries have received deliveries of enough vaccine doses to cover their population twice over and have fully vaccinated nearly 70 per cent of their combined populations, according to FT analysis of data compiled by Unicef and Our World in Data.While observers have signalled that supply has improved significantly in the past year and will continue to ease into 2022, the world is set still to face a shortage of 3bn shots early next year if aggressive booster campaigns in richer nations continue alongside child immunisation, the Financial Times reported on Wednesday.If, on the other hand, countries were to boost only those over the age of 50, supply would meet demand from the start of 2022.The success of Covax — the vaccine access scheme set up by Gavi, a vaccine alliance with the goal of increasing access to immunisation, the Coalition for Epidemic Preparedness Innovations and the WHO — has been mixed. Deliveries to low-income countries have picked up significantly, reaching 29m doses in November and 99.6m since the rollout began, according to data compiled by Unicef. Poorer nations, the WHO, Covax and others have lamented opacity in the order process and late deliveries of vaccine batches with little shelf life left — in some cases as short as three weeks, according to Kate O’Brien, the WHO’s head of vaccines.The industry has pushed back against criticism of tight supplies, saying the problem was instead largely caused by vaccine hesitancy in poorer nations. But activists and global health authorities disagree.

“It provides convenient cover to pharmaceutical companies whose control of markets [has] fuelled artificial scarcity,” wrote health experts including Fatima Hassan, founder of South Africa’s Health Justice Initiative group that campaigns for equitable access to vaccines, in a recent British Medical Journal article. Campaigners and health officials have said manufacturers have favoured deliveries and contracts with the global north, a claim that pharmaceutical companies have denied.“Data show [companies] did not deliver on time, at all, so we were subject in Africa to drip-feed supplies enabled by the disproportionate power of intellectual property monopolies and control,” Hassan said. “Shameful.”The available data do suggest that only about half the doses delivered to low income countries have been administered, suggesting some countries are facing difficulties in absorbing the supplies that they have received.But the WHO’s O’Brien said countries could not “suddenly turn on absorption capacity” at scale when doses suddenly arrived.“It’s not enough to just point at the number of doses being sent,” she told the FT, noting there was also shortage of syringes and that different vaccines with different cold-chain requirements made rollouts very difficult.“If you really wanted to capacitate and facilitate countries to deploy a mass vaccination programme as quickly as possible you wouldn’t design [it like] that.” More

Airlines ordering popular single-aisle jets used on short-haul routes face a two-year wait for delivery as supply constraints persist, according to Airbus, the world’s largest aircraft-maker. Christian Scherer, chief commercial officer at the European aerospace group, said demand from airlines for the company’s A320 family of jets was so strong that “by and large” delivery slots for larger orders were now around 2024-25. “I wish I had more aeroplanes to sell. There is a supply constraint for the most desirable assets out there . . . on the single-aisle, this points towards the A320 and A321 and now also the A220,” he told the Financial Times. Scherer said that despite concerns over the spread of the new Omicron variant of coronavirus, demand was fundamentally being driven by the need for more fuel-efficient aircraft. Airbus last week secured two significant orders, including a deal with Air France-KLM for 100 A320neo and A321neos. The first deliveries are expected in the second half of 2023.“Generally, there has been a realisation by the airline community at large that when people can travel, they will travel and they will do so with a vengeance . . . The Covid crisis has accelerated the realisation that the transition to more . . . fuel-efficient technology is inevitable,” said Scherer. Just 13 per cent of today’s global commercial fleet is of the latest generation, he added. Airlines last year all but stopped ordering planes and in many cases tried to defer or even cancel deliveries at the height of the pandemic. But with many carriers, including Australia’s Qantas, now looking to renew their fleets, pressures have built up in the aerospace supply chain. Manufacturing demands for Boeing’s 737 Max are adding to the strain. The US manufacturer has been outselling Airbus this year for the first time since production of the aircraft resumed in May 2020 after its 2019 grounding. Boeing had secured 692 orders for the Max this year, through to the end of November. Airbus had secured 540 orders for its rival A321neo and A320neo in the same period. The European group still remains on course to retain its title as the world’s biggest aircraft-maker at the end of the year. It delivered 518 planes through to the end of November. Boeing delivered 302. Airbus has insisted that demand for its single-aisle aircraft is strong enough to justify a steep increase in production above pre-pandemic levels. Airbus plans to raise output of its A320-family to 65 jets a month by 2023. It is considering rates as high as 75 a month by 2025. It had reached a record 60 a month in 2019 before dropping to 40 a month last year when Covid hit.

Aircraft lessors and engine makers, however, have expressed concerns over the aggressive targets, worried that too many new jets would push existing ones more quickly into retirement, denting their profits. Ihssane Mounir, senior vice-president of commercial sales at Boeing, sounded a more cautionary note about the demand outlook, telling the Financial Times that “you have to set up production targets that the market will need and towards what the supply chain can support”.“You have to watch the supply chain very carefully. Customers want reliability and quality and predictability,” Mounir said.Despite the pressures in the supply chain, Scherer insisted “there doesn’t seem to be a systemic obstacle that would prevent us from making the ramp-up”. Sash Tusa, analyst at Agency Partners, said it would take time to restore supply chain capacity. Even big suppliers, he added, would want “some form of commitment from Airbus (cash, pricing, or guaranteed offtake) before they invest to bring rates up, certainly over 60 A320neos a month: that level is a real hurdle for the industry”.  More

Financial regulators should agree a global framework for crypto next year after the rapid growth of decentralised finance gave them a “wake-up call”, one of the most senior figures in the debate told the Financial Times. Benoît Cœuré, chief of the Bank for International Settlements’ innovation hub, said conversations about high level global principles for cryptocurrency and decentralised finance had intensified in recent months. The former European Central Bank governing council member has headed the BIS innovation hub for the past two years, giving him a front-row seat to international deliberations on crypto policy as the world’s central banks use BIS to share information and set global guidelines. Cœuré, who announced on Thursday had been nominated to lead France’s competition authority, said it “wasn’t necessarily the wrong decision” for regulators to allow the market to develop and to garner an understanding of “how crypto assets work”. “But now that it is really growing very fast and . . . becoming mainstream in different ways, then certainly the time for consistent regulation has come,” he said in an interview last week.Cœuré said the new “wake-up call” was decentralised finance — a rapidly growing corner of the cryptocurrency market that uses distributed ledger technology and so-called “smart contracts” to carry out billions of dollars worth of transactions without a central hub like an exchange. Decentralised finance, or DeFi as it is known, “opens new avenues . . . for interconnectedness with traditional finance which creates potentially new forms of systemic risk” that regulators can no longer ignore, Cœuré said, pointing out that DeFi connected with both stablecoins, widely used as a settlement instrument on DeFi platforms, and traditional finance. “These [new] services will be competing with traditional finance, and money will flow in and out from one universe to another. This creates a compelling reason to start a discussion on global principles for crypto regulation.”The pace at which rules are developing in individual jurisdictions is also strengthening the urgency for delivering a global framework. “The risk in 2022 is that large jurisdictions [like] Europe, the UK, the US, China, keep moving on but along different tracks and produce a system which is globally inconsistent,” said Cœuré. “That’s a risk that should be avoided and there’s still time to avoid it,” he added, pointing out that different approaches would create the opportunity for “regulatory arbitrage” where companies and individuals could game authorities by picking the most advantageous places for their business. Cœuré said the Financial Stability Board, a global grouping of finance ministries and regulators hosted by BIS, would be the most natural forum to agree a consistent framework and that it was possible for them to do it in 2022, though he cautioned that “we are probably at least two or three years away from having a stable landscape globally” since it will take time for countries to adopt the measures. He added that the crypto framework could include agreements on categories for different activities and deciding whether a stablecoin — a form of cryptocurrency backed by traditional assets like the dollar — is electronic money, a money-market fund or a security. It should also include guidance so “service providers in these ecosystems and platforms are regulated according to the services they are providing”.

Cœuré favoured “strong consumer protection rules” and “personally wouldn’t mind if pension funds were to be prohibited from investing in crypto . . . it seems to be contrary to the kind of safety that you expect from a pension fund”. Still, he conceded that despite the strong case for global co-operation, different countries’ approaches to privacy would limit the scope for a global framework, as would some countries’ reluctance to share details about the technology used in their ecosystems, since the technology used in finance often overlaps with the technology used for other strategic purposes. “The final decisions of sovereign states will be . . . a balance between sovereign strategic considerations on the one side and considerations about the good functioning of the financial system on the other,” he said. “That’s not new, it’s just that . . . these balances are shifting because technology is so important. The new risk is governments raising technological fences which create fragmentation in the global financial system.”He also said policymakers were increasingly aware that central bank digital currency “should not be treated as a separate discussion” or allowed to stay in the separate track where it has developed. “We’re seeing the discussion pivoting . . . towards CBDC (central bank digital currency) being . . . a foundational contribution to the new ecosystem,” he said. “You need central bank money as a safe asset that can be used as a settlement asset to make the new system stable . . . It’s not about CBDC being the sovereign alternative to private money, it’s more about CBDC being the glue that will hold the system together.” More

The furore over whether IMF managing director Kristalina Georgieva manipulated data to favour China in her previous role at the World Bank nearly cost the Bulgarian economist her job.Whatever the truth of the allegations, no one doubts China’s determination to make its mark on the multilateral institutions that underpin the global financial system.“China wants a bigger voice and more chairs at the table,” said Yu Jie, senior China research fellow at Chatham House. “It wants to brand itself as the leader of the global south.”China’s geopolitical ambitions have stepped up in recent months, from outlawing trading in cryptocurrencies while simultaneously promoting the digital renminbi, to trade measures that target countries with which it disagrees. These included closing its doors to Lithuanian exports this month after the Baltic state allowed a Taiwanese representative office to open in Vilnius.Just as important are China’s financial and diplomatic ambitions at the UN and Washington-based institutions such as the IMF and World Bank, which lie at the heart of the global system designed by western countries after the second world war. Distinctively, China pursues its ambitions by using its unusual dual status as both a developing economy and a superpower.“There really isn’t a precedent for what we’re seeing with China,” said Scott Morris of the Center for Global Development, a Washington-based think-tank. “China is uniquely important at these institutions, especially at the World Bank . . . as a shareholder, as a donor and as a client.”For the world’s poorest countries, China is now the world’s biggest bilateral lender, bigger in fact than all other bilateral lenders combined.Its ambitious Belt and Road Initiative of overseas infrastructure investment has also been cut back and replaced by the milder sounding Global Development Initiative launched by President Xi Jinping at the UN General Assembly in September.This is an example of China “playing two hands”, said Yu. With one, it seeks the endorsement of global institutions such as the UN to drive its agenda and gain support, especially among developing countries. The GDI “doesn’t even sound like a Chinese initiative”, Yu said. Yet at the same time, when its global ambitions at the World Bank or elsewhere are thwarted, it quickly sets up alternatives such as the Shanghai-based New Development Bank and the Asian Infrastructure Investment Bank.China’s frustrations are understandable. The G20’s prominent role during the 2009 financial crisis was a belated western acknowledgment that China and other major emerging economies deserved a greater say in global governance. Yet little has changed at the IMF or World Bank since. Despite accounting for almost a fifth of the world economy, China’s shareholding at both institutions is only about 6 per cent, smaller than Japan’s and barely a third of that of the US. Efforts to reform the IMF’s quota system have been stymied by those, including European countries, who would lose out.As for the World Bank, a formula it devised after the financial crisis would have doubled China’s shareholding to 12 per cent. But by the time that proposal was considered, during Donald Trump’s administration, Sino-US relations had soured and China’s ambitions were put on hold after the plan was kicked down the road for later consideration. “If you are the US, do you want to deeply upset [allies] in order to please China?” asked Morris. “It’s hard to read the landscape and conclude the US is going to do that.”Such tensions came to a head during the World Bank’s 2018 capital increase. That was when Georgieva, as its chief executive then, allegedly oversaw the manipulation of data in the bank’s flagship Doing Business report to flatter China’s ranking. When the allegations emerged in September this year, Georgieva, who had since moved to the IMF to become its managing director, was accused of doing so to help persuade China to stump up more money. But as she noted in her defence, China had “unequivocally supported a capital increase for the Bank for many years”. Rather, her critics say, she did so to placate Beijing after others disallowed any increase in its shareholding.

Georgieva has denied any wrongdoing and the IMF board, after reviewing the allegations, concluded there was insufficient evidence to show she played an improper role.China has had greater success at the UN. Over the past 20 years, its contributions have risen from 1 per cent to 12 per cent as Beijing seeks to increase its influence, putting the country in second place. Meanwhile, US contributions have slipped from 25 to 22 per cent.Chinese nationals now head four UN institutions, including the Food and Agriculture Organization and the International Telecommunication Union, on a par with the US.Such influence comes at a comparatively low cost. “You have to give them credit for understanding that with relatively little money you can become an important player in the international setting,” said Augusto Lopez-Claros, executive director of the Global Governance Forum. “They have understood that better than the Americans.”An examination by the CGD into China’s expanding role in multilateral institutions and other development banks showed that Beijing asserted itself wherever possible in those bodies. Yet, as China is still officially classified “a developing country”, it also drew on those institutions for financial and technical help.“They haven’t backed off at all from their status as a developing country,” said CGD’s Morris. “That really is unique. If you think of India or the other big emerging economies, they borrow a lot but they don’t have the status of a global leader.” More

The numbers verge on the incomprehensible. Since the pandemic began, central banks have injected $32tn in to markets around the world, equivalent to buying $800m of financial assets every hour of the past 20 months, according to Bank of America. Global equity market capitalisation has soared by $60tn.But inflation has risen, and, eager to rein in prices, the US Federal Reserve last week announced its asset purchases will come to an end in March, with three interest rate rises likely next year. Against this backdrop, these are the big questions banks and investors are asking for 2022. Inflation: if not transitory, then what?Central banks performed a U-turn on inflation in 2021, shifting from a reassurance that it would be a “transitory” reflection of the post-lockdowns bounceback to an acceptance that it is more persistent. In November, US consumer prices climbed at the fastest pace since 1982, eurozone prices rose by a record 4.9 per cent and UK figures jumped to a 10-year high. Yet many banks and investors expect a retreat.Morgan Stanley predicts that even though prices are likely to stay high next year, the rate at which they increase will peak in early 2022 as oil prices subside and supply chain issues ease. Columbia Threadneedle likewise cites “improvements in the supply chain” as a significant reason why it thinks inflation will “ultimately fall” in 2022. This raises the alarming prospect that the Fed starts pushing up rates just as inflation backs down.But BlackRock, the world’s largest asset manager, predicts higher inflation will persist “for years to come”. Goldman Sachs expects core US consumer prices to remain above 4 per cent deep in to next year. Central banks’ willingness to tolerate higher inflation will keep inflation-adjusted bond yields relatively low, which should also provide support for equity markets, it says. It expects positive returns from global equity markets and negative returns from government bonds for a second year in a row, the first time this combination has happened for half a century. Central banks have started turning off the taps, or at least signalling that they will next year. Investors are nervous that they will end up clamping down too hard.David Folkerts-Landau, chief economist at Deutsche Bank, says if inflation fails to moderate, central banks will shift into a “more aggressive monetary tightening stance, causing a sharply negative reaction in financial markets and most likely a significant economic recession”. UBS says a central bank policy error is one of the “key risks for investors and the global economy in 2022”. Bank of America adds that markets “are moving from a period in which central banks have tried to be predictable and suppress volatility to one in which they will increasingly be the source of surprises”.Will US equities keep rising?“Clients say to us that market momentum has peaked, earnings have peaked, liquidity has peaked, central banks will be tightening, you should be taking some profits,” said Mislav Matejka, head of global and European equity strategy at JPMorgan. “We don’t agree with that.”Goldman Sachs expects the S&P 500 to climb a further 9 per cent by the end of 2022. Some worry however that gains in equities, particularly in frothier corners of the market, are not sustainable.Morgan Stanley says its base-case scenario is for the S&P to drop 5 per cent. Bank of America meanwhile predicts that economic deceleration and higher interest rates will drag the main US equity gauge down 3 per cent. What is the outlook for Europe?The European Central Bank faces a “difficult and volatile” environment for prices heading into next year, says Frederik Ducrozet, senior strategist at Pictet Wealth Management.“The broad outlook is one of not just permanently high inflation but also of permanently high inflation volatility,” he said.The ECB last week committed to scaling back its pandemic-era bond-buying programme in response to higher prices, while reiterating that rate rises will have to wait until 2023. The consensus expectation, according to data compiled by Bloomberg, is for the Stoxx 600 index to rise 6 per cent as economic growth continues and yields on bonds remain low. Yet Bank of America expects those trends to reverse in 2022, with the Stoxx falling 10 per cent.Ben Ritchie, head of European equities at Abrdn, the Edinburgh-based asset manager, says investors should focus on businesses with strong competitive positions, pricing power and access to structural growth drivers. Although valuation multiples for European equities are a challenge, Ritchie says the healthcare, consumer goods and financial sectors offer “plenty of opportunities”. Pimco, however, predicts that European equities will be “more challenged” owing to a combination of unfavourable sector composition, energy price headwinds, and growing unease around the Covid-19 outlook.Jordan Rochester, a foreign exchange strategist at Nomura, says upward pressures on energy, food and services prices will mean the headline European inflation rate will remain uncomfortably high next year. He notes that the price of gas in Europe has risen about 573 per cent this year, reflecting concerns that Germany could run low on supplies over winter. Increases in the cost of gas are driving up fertiliser prices, which are highly correlated with the price of food. Consumers are likely to react to these developments with demands for higher wages, Rochester says. Watch out for French presidential elections in April. What next for China and emerging markets?“Emerging markets had a really horrible year and there are going to be a lot more ugly headlines . . . in part because [China’s] zero-Covid policy is going to be tough to maintain, especially with Omicron,” said Chris Jeffery, multi asset manager and head of rates and inflation at LGIM. China’s CSI 300 stocks index has fallen 3 per cent this year after policymakers in Beijing imposed new restrictions on technology, education and property companies. Meanwhile, Claudia Calich, head of emerging markets debt at M&G Investments, says the problems in China’s property sector serve as a reminder of the dangers and fragility that can lurk in Asian corporate bond markets, until recently a growing area of interest for international investors.Calich added that investors should brace for “significant downside risks” in emerging markets if the severity of the virus proves to be worse than anticipated, particularly among the many nations that still have largely unvaccinated populations. More

Pakistan’s government has sought to defuse tensions linked to one of China’s showcase Belt and Road investments in the country, striking a deal with protesters who for weeks have demonstrated in the port city of Gwadar.For the past month, fishermen and other residents of Gwadar, located in the south-western province of Balochistan, have protested in frustration that promised prosperity from the controversial Chinese-built port and other projects has failed to materialise.Locals complain that fishing trawlers encroach on their waters and that authorities have facilitated billions of dollars worth of Chinese infrastructure investment while neglecting basic services, such as education and drinking water supply.The backlash attracted the attention of Prime Minister Imran Khan, who wrote last week that he had “taken notice of the very legitimate demands of the hardworking fishermen of Gwadar” and would clamp down on illegal fishing. Pakistan and China are investing about $500m in the port.The government said on Thursday that it would ban fishing by outside trawlers to protect local fishing rights, as well as expedite projects to improve access to clean drinking water and bolster other public services for local residents, as it sought to bring the protests to an end.The peaceful demonstrations exposed the persistent tension lingering over Chinese mega-projects in a highly sensitive region of Pakistan. Balochistan is home to a long-running insurgency by separatists who believe the area, one of the poorest in the country, is being exploited by the state for resources including gas and minerals.The region’s problems also expose the difficulties facing Chinese president Xi Jinping in implementing the Belt and Road Initiative, an ambitious $1tn project that seeks to build bridges, ports and roads through some of the world’s poorest countries.

“The grievances of the local population were there for long. There is no employment for local people, drinking water is an issue and security is an issue,” said Ayaz Amir, a former member of Pakistan’s parliament.Chinese nationals and projects have been targeted in Balochistan and elsewhere in Pakistan, most recently in a July attack that killed 13 people — including nine Chinese — in a neighbouring province.“Chinese have been looking at [Gwadar] with deep interest and caution as well. If the Pakistani government is not able to manage it, then they will reconsider that interest,” said Bilal Gilani, executive director of Gallup Pakistan. “In some sense, it’s a protest that’s acceptable to the federal government, which is battling a similar resistance in a more militant fashion,” he added. “They would rather grievances be channelled through this platform rather than a more militant platform.”Located near Pakistan’s western border with Iran, Gwadar is the southernmost entry point to the $60bn China-Pakistan Economic Corridor. CPEC is a centrepiece of Xi’s Belt and Road programme.China plans to link its western Xinjiang province to Gwadar, providing a vital strategic access point to the Arabian Sea and Gulf through a network of highways and energy pipelines.Government officials acknowledged that the protests exposed gaps in the planning and development of CPEC.“We have never seen a similar protest in the past in Gwadar,” said Ali Shah, a prominent TV journalist in Quetta, the capital of Balochistan. The protests are “a lesson which must be remembered and the demands of the population ought to be met before this happens again”. More